ILS issuance hits $1.55 billion in third quarter
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The $1.55 billion of property/casualty insurance linked securities issued during the third quarter of 2018 over five transactions broke the standing third-quarter record of $1.4 billion in 2013, according to the ILS Market Update, November 2018, from Willis Towers Watson PLC released Tuesday.
Meanwhile, the market appears to be moving away from index-based triggers, although there are still some prudent uses for them, the broker added in its report.
The 2018 third-quarter issuance was also more than three times the $500 million of issuance from the third quarter of 2017, according to data in the report.
Of the roughly $1.55 billion issued this past quarter, $200 million will provide peak multiperil protection and $650 million will provide U.S. earthquake protection, the report said.
The quarter’s largest bond was Kaiser Permanente’s Acorn Re 2018-1, providing $400 million of U.S. earthquake coverage through November 2021 using a parametric trigger.
Although the quarter’s largest bond was parametric, four of the six deals were indemnity-based, and Willis asserted the sector is moving away from indexed deals.
“The market has largely moved away from rather than toward index triggers and in our view, will likely continue to do so,” the broker said in its report, albeit with the caveat: “That being said, there remain some excellent use cases for index triggers. The primary advantages include enhanced speed of calculation and recovery, transparency and ease of understanding for all parties,” the report said.
The report was bullish for the overall market, suggesting the robust third quarter could provide momentum into the end of year.
“This record-breaking Q3 issuance seems to put this year’s $8.7 billion year-to-date issuance, as of Q3-end, on track to approach or even exceed last year’s record of $9.7 billion,” the report said.
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